Doctor of Philosophy, The Ohio State University, 2015, Economics
In the first essay, entitled “Voluntary Contributions and Collective Redistribution”, I answer two key economic questions: (1) how will members of a group distribute the payoffs of a joint project when they can bargain over the output's value? (2) How does collective bargaining over the shares of joint output affect individual investment decisions? I approach these questions both theoretically experimentally. The model consists of an investment stage in which contributions are scaled up and become part of a common fund, just as in a public goods game, and then members of the committee bargain with alternating offers (the well-known Baron and Ferejohn game 1989, henceforth BF). When bargaining, a member is randomly selected as the proposer to redistribute the common fund among the members, whom subsequently proceed to vote. If the proposal receives a majority of votes, the allocation is binding, if not, the process repeats itself. Under the stationary refinement of strategies (used in almost all models of bargaining), the equilibrium specification prescribes no contributions to the common fund due to strategic bargaining incentives to exclude redundant members from the allocation by offering shares only to a minimum winning coalition required for approval. Another prediction is that proposers possess a payoff advantage, which has been verified in previous experimental implementations of the bargaining game without contributions. In a variant of my model, the probability of being the proposer depends on a member's contribution relative to her partners' investments, surprisingly yielding similar predictions and experimental results.
Contrary to the predictions, the experimental evidence shows that a virtuous cycle arises in which contributions grow close to full efficiency because members redistribute in a fair manner. Incentives to free ride, by contributing little and attempting to retain a large portion of the fund, are halted by the low acceptance rates faced by (open full item for complete abstract)
Committee: John Kagel (Advisor); Jim Peck (Advisor); Paul Healy (Committee Member)
Subjects: Economics